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(Editor’s note: Pamela Springer is CEO of Manta, which provides information on small companies. She submitted this story to VentureBeat.)
As strange as it might sound, the key to success in startups is not always knowing where you are in your revenue and profitability growth cycle. Instead, it’s much more important to keep track of people, strategy and capital – and in that order.
Understanding the strengths of your team – and your leaders in particular – allows you to build the details of your strategy that you can proactively manage. Aligning your strategy with your team’s strengths increases your chances of staying focused on sustainability.
On-the-job training is expensive, so check resumes and gauge how prospects for key roles have performed in previous jobs. If you have strong generalists, recognize you might need to evolve them into specialists. And keep an eye on balance: Having too many people on the team who have never experienced the start-up life (and the duties and responsibilities that go with it) can be dangerous. Ideally, you’ve got committed, passionate and experienced leaders who can help navigate the inevitable bumps.
Having said this: Skills aren’t everything. The team needs to work well together. Many people are hired on skills, but fired due to their traits.
It’s very easy for a business to stray from its core mission. A clear focus on your company’s strategic goals is the key to staying on course – or knowing when it’s time to modify things. Focus initially on “adoption” or revenue – confirming you have a product or service the market wants to buy. Use the first few sales to gather feedback on missing features and what your customers like. Your next batch of customers will typically be more profitable (since you’ve made improvements and streamlined processes based on initial feedback).
As you start to establish a foothold in the marketplace, you’ll need to determine if your product has the capability to scale and bring a critical mass of customers and revenue to your company (depending, of course, on the market size and opportunity). If not, think of adjacent markets to leverage or where you can re-package your existing product. (Note, though, that it is foolhardy to expand into a new segment before your initial product is well established.
It goes without saying that it’s important to have appropriate financial resources. Bootstrapping an early stage company is typically the best option, as it allows you to validate the market and get initial feedback from customers. Once you’ve got a better sense of the market (and have secured a few customers), then it’s safe to begin thinking about outside investment.
Assuming you can find a willing venture capitalist or angel investor, deciding whether to accept a cash infusion ultimately depends on how fast you want to grow your company – and what you have planned for your exit strategy. Keep in mind that it’s best to secure capital when you don’t need it, as trying to raise or find money when you do need it is tough.
Understanding where you are in the maturity curve of each of these three categories will help you position your business better for the future. Cash is obviously important – but if you don’t have the right team and strategy, you’ll never see the capital.